Meanwhile, fears of an inverted yield curve also helped to rack U.S. equities as sell-offs in stocks were accompanied by an influx of capital into bonds. As equities investors seek asylum into safer-haven assets like debt, the shift is occurring across the spectrum whether it’s short or long-term durations.
Notably, inflows into short-term bonds are allowing for a steeping yield curve, which should ease some investor fears of the opposite–an inverted or flat yield curve, which could portend to a forthcoming economic slowdown.
“The expectations of further turmoil in equities and widening in credit is serving to support Treasuries,” said Peter Chatwell, head of European rates strategy at Mizuho International Plc. “The main support for USTs being at the front end highlights that investors are comfortable in positioning contrary to what the Fed has been guiding the market to expect.”
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